eclerx Services Ltd.

Transcription

1 2017 Equirus All rights reserved Rating Information Price (Rs) 1,327 Target Price (Rs) 1,264 Target Date 31st Mar '18 Target Set On 13th Jan '17 Implied yrs of growth (DCF) 5 Fair Value (DCF) 1,174 Fair Value (DDM) 86 Ind Benchmark BSE IT Model Portfolio Position NA Stock Information Market Cap (Rs Mn) 52,885 Free Float (%) % 52 Wk H/L (Rs) /1255 Avg Daily Volume (1yr) 37,150 Avg Daily Value (Rs Mn) 54 Equity Cap (Rs Mn) 398 Face Value (Rs) 10 Bloomberg Code ECLX IN Ownership Recent 3M 12M Promoters 50.3 % -0.2 % -0.1 % DII 12.0 % 0.2 % -2.1 % FII 30.7 % 1.1 % 3.6 % Public 7.0 % -1.1 % -1.4 % Price % 1M 3M 12M Absolute 2.1 % -1.5 % -6.9 % Vs Industry -5.1 % -0.9 % 4.1 % Hinduja Global -7.9 % % 26.2 % Firstsource % % % Consolidated Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (17A) EPS (18E) eclerx Services Ltd. Absolute : REDUCE Relative : Underweight 4QFY17Result: Estimate ( ), PT ( ), Rating ( ) Regular Coverage -1% Downside in 13 Months But for valuations. Retain REDUCE eclerx reported decent 4Q, relative to toned-down expectations, driven by growth in emerging clients while overall commentary was encouraging. eclerx highlighted that it is better prepared, today, to capitalize on existing demand driven by initiatives including client mining, near shore delivery, focus on expanding offerings (analytics) taken in FY17. That said, seasonality could vary as revenue headwinds are now expected in 2QFY18 vs. 1Q earlier. Management reiterated its about 30% EBITM guidance for FY18E despite the challenging environment. We are modestly raising our revenue estimates but are trimming our margin assumption driven by rupee, drag from project roll-offs and leads to cut in our target price. Maintain REDUCE with TP of Rs. 1,264 at 15x Jun 18 TTM EPS of Rs (Mar 18, Rs. 1,331, 15x earlier). Emerging clients to drive growth in FY18E: During FY17, top 10 customer revenues declined 4.9%/4.6% in $/CC terms while for emerging clients it grew 4.6%/8.5%, respectively. As for 4Q, top 5/6-10 revenues declined/grew 2.7%/6.1% while non-top 10 customer revenues grew 10% qoq. Commentary suggests momentum in emerging clients could continue in FY18E driven by pipeline build-up, whereas top client growth could be soft. Client counts in top 2 brackets ($5 mn+/$1 mn+) have declined/increased by 1 due to transitioning of a large customer. Visibility improving: eclerx highlighted that new contract wins were similar to FY16 but current pipeline, within emerging clients, is largest compared to the previous 4-5 quarters driven by recovery in financial services and momentum in digital offerings. Commentary also suggests a pickup in demand from banking clients in the next months. From a quarterly perspective, all quarters except 2Q could witness growth while 2Q revenues could decline (0 to -5%) qoq led by project roll-offs. Consequently, we are adjusting our estimates and expect a modest 1.6% yoy growth vs. 0.7% decline earlier. Margins softer than anticipated: EBITM expanded 151bps qoq to 29.5% - but were 46bps below EE (30%) driven by growth and decline in employee costs partially offset by higher SG&A expenses. Employee costs declined 1.7% qoq vs. our 0.7% decline estimate, while sales & distribution costs rose 2.5% qoq and G&A increased 1.7% qoq. eclerx guided for about 30% margins in FY18E driven by levers such as hedges, SG&A rationalization, and depreciation due to lower capex. That said, change in rupee/tax assumption leads to cut in in margin assumption/earnings. Retain REDUCE on rich valuations: Though shareholder value creation initiatives could anchor shares, EPS growth remains modest while valuations at 16.5x FY18E EPS remain rich. Retain REDUCE with TP of Rs. 1,264 at 15x Jun 18 TTM EPS of Rs Change in Estimates IT Services Revised Estimates % Change ` FY18E FY19E FY18E FY19E Sales ($ Mn) % 1.5% Sales 13,017 14, % -0.7% EBITDA 4,450 5, % -2.4% EBIT 3,871 4, % -2.9% PAT 3,279 3, % -2.6% EPS % -2.6% Consolidated Financials Rs. Mn YE Mar FY17A FY18E FY19E FY20E Sales 13,300 13,017 14,065 14,981 EBITDA 4,689 4,450 5,097 5,399 Depreciation Interest Expense Other Income Reported PAT 3,534 3,278 3,852 4,099 Recurring PAT 3,536 3,278 3,852 4,099 Total Equity 14,350 15,418 16,938 21,037 Gross Debt Cash 6,060 10,155 11,055 14,567 Rs Per Share FY17A FY18E FY19E FY20E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 28 % 22 % 24 % 22 % Core ROIC (%) 54 % 49 % 58 % 56 % EBITDA Margin (%) 35 % 34 % 36 % 36 % Net Margin (%) 27 % 25 % 27 % 27 % May 31, 2017 Analyst: Abhishek Shindadkar (abhishek.shindadkar@equirus.com ) Page 1 of 12 Before reading this report, you must refer to the disclaimer on the last page.

2 Key takeaways from the conference call Emerging clients to drive growth in FY18E, top could be soft. Stronger pipeline with emerging clients than past twelve months. Expect pickup in demand from banking clients in the next months. Opened first delivery centre in the US in North Carolina and New Houston office for Analytics. Delivered largest consulting and analytics related work at client locations. Revenue headwind to occur in 2QFY18 instead of Q1. Company retained its 30% EBITM guidance for FY18E Employee costs could remain elevated due to hike in wages (higher single digits for offshore staff and low single digit for onshore staff). Company has trained employees on robotics in Q4FY17 as planned earlier. Utilization declined 190bps qoq and could decline further due to pending roll-offs in 2QFY18. Attrition increased both qoq and yoy to 34%. ETR is lower in 4Q at 19% due to tax credit and could be 25% in FY18E as credits are exhausted. Capex was down compared to last year and expected to decrease in FY18 as the company has sufficient capacity in all development centres. One European client has changed the payment term from Euro to USD Other income decreased to loss ofrs. 72.6mn vs. profit of Rs mn qoq. Total hedge position at $ at strike rate of 72.1 INR/USD and 100% forwards. Dividend of Rs. 1 has been declared for FY17. May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 2 of 11

3 Quarterly Results Table (Consolidated) % Change Rs Mn Q4FY17 Q4FY17E Q3FY17 Q4FY16 Q4FY17E Q3FY17 Q4FY16 Net Sales ($ Mn) % 1.5% -5.7% Net Sales (Rs Mn) 3,315 3,157 3,247 3, % 2.1% -3.4% India Employee Cost 1,316 1,325 1,339 1, % -1.7% 7.5% G&A % 1.7% 2.4% Selling & Distribution % 2.5% 4.3% Comments Total Expenditures 2,199 2,075 2,203 2, % -0.2% 5.8% EBITDA 1,116 1,082 1,044 1, % 6.9% -17.6% Depreciation % 2.5% -10.9% EBIT , % 7.6% -18.4% Other Income % % % PBT 906 1,024 1,023 1, % -11.4% -29.3% Tax % 0.0% -41.3% Recurring PAT , % -13.5% -26.0% Extraordinaries Reported PAT , % -13.5% -26.1% EPS (Rs) % -13.5% -26.0% EBITDA Margin 33.7% 34.3% 32.1% 39.4% -60 bps 152 bps -578 bps EBIT Margin 29.5% 30.0% 28.0% 35.0% -46 bps 151 bps -543 bps PBT Margin 27.3% 32.4% 31.5% 37.3% -509 bps -416 bps bps PAT Margin 22.4% 25.9% 26.5% 29.3% -351 bps -406 bps -688 bps Tax Rate 17.9% 20.0% 15.8% 21.5% -213 bps 203 bps -366 bps May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 3 of 11

4 Exhibit 1: Key Metrics across quarters Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q $ revenue qoq growth(%) 4.7% -0.6% 2.0% 5.2% 2.1% 4.6% 14.0% 8.2% 3.2% -1.9% -1.2% -2.6% -3.5% 1.5% Net employee addition Attrition 31.8% 30.1% 24.6% 28.4% 29.0% 31.0% 31.1% 35.9% 36.6% 28.6% 30.4% 41.3% 33.1% 34.0% DSO (Billed revenues) Client concentration Top-5 Clients 74% 73% 71% 68% 66% 64% 57% 56% 58% 58% NR NR NR NR Top -10 Clients NA NA 88% 87% 87% 86% 78% 75% 77% 76% 74% 75% 76% 74% Geographic Concentration North America 74% 74% 73% 74% 78% 78% 72% 67% 67% 67% 66% 68% 69% 67% Europe 21% 22% 22% 23% 18% 18% 25% 29% 29% 30% 30% 29% 27% 28% ROW 5% 4% 5% 3% 3% 4% 3% 4% 4% 3% 4% 3% 4% 5% Growth Top 10 Clients NR NR NR 4% 2% 3% 3% 4% 5% -3% -3% -2% -1% -1% Non Top 10 Clients NR NR NR 14% 2% 13% 79% 23% -3% 2% 4% -4% -10% 11% North America 4.7% -0.6% 0.6% 6.7% 7.6% 4.6% 5.2% 0.7% 3.2% -1.9% -2.7% 0.4% -2.1% -1.5% Europe 4.7% 4.2% 2.0% 10.0% -20.1% 4.6% 58.3% 25.5% 3.2% 1.5% -1.2% -5.8% -10.1% 5.2% ROW 4.7% -20.4% 27.5% -36.9% 2.1% 39.5% -14.5% 44.3% 3.2% -26.4% 31.8% -26.9% 28.7% 26.9% May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 4 of 11

5 Company Snapshot How we differ from Consensus EPS Sales PAT - Equirus Consensus % Diff Comment FY18E % Consensus numbers before earnings FY19E % FY18E 13,017 13,522-4 % FY19E 14,065 14,926-6 % FY18E 3,278 3,562-8 % FY19E 3,852 3,987-3 % Our Key Investment arguments: Challenges across business segments like Financial Services (lower spending), Digital business (scaling issues and volatility) and Cables (now higher base) Ending of short term rollouts resulting in slower replenishment of revenues. Key Parameters FY17A FY18E FY19E FY20E Overall US$ Revenue USD-INR Rate Ending Headcount 8,737 8,837 9,037 9,237 Qtrly Revenue/employee 5,576 5,679 5,868 6,113 Utilization 68.5% 66.1% 66.8% 66.8% Selling and Marketing (% of Rev.) 12.9% 13.2% 11.9% 11.9% G&A (% of Rev.) 12.4% 12.1% 11.6% 11.6% EBIT Margin (%) 31.4% 29.7% 31.7% 31.7% PBT Margin (%) 32.8% 33.1% 35.6% 35.5% PAT Margin (%) 26.6% 25.2% 27.4% 27.4% Risk to Our Negative View: Rupee depreciation, revival in top clients, higher quantum digital wins, better than expected operating efficiency Acquisitions, Revival in key segments, Further penetration into Europe with CLX synergies, lower offshore employee costs Sensitivity to Key Variables % Change % Impact on EPS Rupee Appreciation 1 % -40bps Utilization 1 % +50bps DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 6.9 % % 4.0 % 0.0 % - FY18E FY19E FY20-22E FY23-27E FY28-32E Sales Growth -2 % 8 % 6 % 4 % 5 % NOPAT Margin 23 % 24 % 23 % 21 % 20 % IC Turnover RoIC 49.0 % 58.1 % 52.8 % 46.1 % 43.1 % Years of strong growth Valuation as on date (Rs) 1,026 1,122 1,071 1,068 1,099 Valuation as on 30 th Jun 18 1,124 1,230 1,174 1,171 1,204 Based on DCF, assuming 5 years of 5% Sales CAGR growth and 43% average ROIC, we derive current fair value of Rs. 1,099 and 30 th Jun 18 fair value of Rs. 1,204. Company Description: eclerx is a mid-tier BPO player offering a blend of BPO and KPO services to leading investment banks, a leading computer and computer peripherals manufacturer and a few other Fortune 500 companies in Cable and Telecom, e-retail segment and travel and tourism industry. Key Triggers Comparable valuation Mkt Cap Price Target EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Date FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E Eclerx REDUCE 1,327 52,885 1,264 31st Mar ' % 22 % 24 % 0.1 % 3.5 % Hinduja Global NR ,601 NA NA % 13 % 11 % 2.7 % 5.0 % Firstsource NA 33 22,296 NA NA % 10 % 11 % 0.0 % 0.0 % May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 5 of 11

6 Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18E 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E Revenue 3,403 3,335 3,247 3,315 3,273 3,155 3,239 3,350 3,431 3,471 3,537 3,625 13,300 13,017 14,065 14,981 India Employee Cost 1,325 1,267 1,339 1,316 1,352 1,325 1,308 1,289 1,392 1,438 1,403 1,429 5,246 5,275 5,662 6,061 G&A ,647 1,569 1,635 1,741 Selling & Distribution ,718 1,723 1,671 1, EBITDA 1,260 1,270 1,044 1,116 1, ,129 1,273 1,233 1,226 1,294 1,344 4,689 4,450 5,097 5,399 Depreciation EBIT 1,140 1, ,119 1,077 1,069 1,135 1,184 4,170 3,871 4,465 4,742 Interest Other Income PBT 1,240 1,189 1, , ,100 1,243 1,200 1,199 1,273 1,330 4,358 4,313 5,002 5,324 Tax ,035 1,150 1,224 PAT bef. MI & Assoc ,024 3,536 3,278 3,852 4,099 Minority Interest Profit from Assoc Recurring PAT ,024 3,536 3,278 3,852 4,099 Extraordinaries Reported PAT ,024 3,534 3,278 3,852 4,099 EPS (Rs) Key Drivers $ revenue Employee Headcount Increase Average $-Rs exchange rate Sequential Growth (%) Revenue -1 % -2 % -3 % 2 % -1 % -4 % 3 % 3 % 2 % 1 % 2 % 2 % India Employee Cost 8 % -4 % 6 % -2 % 3 % -2 % -1 % -1 % 8 % 3 % -2 % 2 % EBITDA -7 % 1 % -18 % 7 % -6 % -6 % 14 % 13 % -3 % -1 % 6 % 4 % EBIT -5 % 0 % -20 % 8 % -7 % -7 % 15 % 14 % -4 % -1 % 6 % 4 % Recurring PAT -5 % 1 % -11 % -14 % 3 % -5 % 14 % 13 % -2 % 0 % 6 % 4 % EPS -5 % 1 % -11 % -14 % 3 % -5 % 14 % 13 % -2 % 0 % 6 % 4 % Yearly Growth (%) Revenue 14 % 2 % -6 % -3 % -4 % -5 % 0 % 1 % 5 % 10 % 9 % 8 % 1 % -2 % 8 % 7 % EBITDA 21 % 7 % -15 % -18 % -16 % -22 % 8 % 14 % 17 % 23 % 15 % 6 % -2 % -5 % 15 % 6 % EBIT 23 % 10 % -15 % -18 % -20 % -25 % 8 % 14 % 18 % 25 % 16 % 6 % -2 % -7 % 15 % 6 % Recurring PAT 27 % 19 % 1 % -26 % -20 % -25 % -3 % 27 % 21 % 26 % 17 % 8 % 3 % -7 % 18 % 6 % EPS 27 % 19 % 1 % -26 % -20 % -25 % -3 % 27 % 21 % 26 % 17 % 8 % 3 % -7 % 18 % 6 % Margin (%) EBITDA 37 % 38 % 32 % 34 % 32 % 32 % 35 % 38 % 36 % 35 % 37 % 37 % 35 % 34 % 36 % 36 % EBIT 34 % 34 % 28 % 30 % 28 % 27 % 30 % 33 % 31 % 31 % 32 % 33 % 31 % 30 % 32 % 32 % PBT 36 % 36 % 31 % 27 % 31 % 30 % 34 % 37 % 35 % 35 % 36 % 37 % 33 % 33 % 36 % 36 % PAT 28 % 29 % 27 % 22 % 23 % 23 % 26 % 28 % 27 % 27 % 28 % 28 % 27 % 25 % 27 % 27 % May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 6 of 11

7 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar/08 Mar/09 Mar/10 Mar/11 Mar/12 Mar/13 Mar/14 Mar/15 Mar/16 Mar/17 Mar/18 Consolidated Financials P&L (Rs Mn) FY17A FY18E FY19E FY20E Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E Revenue 13,300 13,017 14,065 14,981 Equity Capital PBT 4,358 4,313 5,002 5,324 Op. Expenditure 8,612 8,567 8,968 9,582 Reserve 11,744 15,010 16,530 20,629 Depreciation EBITDA 4,689 4,450 5,097 5,399 Networth 12,152 15,418 16,938 21,037 Others Depreciation Long Term Debt Taxes Paid 822 1,035 1,150 1,224 EBIT 4,170 3,871 4,465 4,742 Def Tax Liability Change in WC -1,236 1, Interest Expense Minority Interest Operating C/F 2,817 5,006 4,331 4,612 Other Income Account Payables Capex ,100-1,100 PBT 4,358 4,313 5,002 5,324 Other Curr Liabi 1,267 1,132 1,223 1,303 Change in Invest Tax 822 1,035 1,150 1,224 Total Liabilities & Equity 13,568 16,729 18,353 22,545 Others PAT bef. MI & Assoc. 3,536 3,278 3,852 4,099 Net Fixed Assets 2,521 2,842 3,160 3,502 Investing C/F ,100-1,100 Minority Interest Capital WIP Change in Debt Profit from Assoc Others Change in Equity Recurring PAT 3,536 3,278 3,852 4,099 Inventory Others ,209-2,332 0 Extraordinaires Account Receivables 1,895 1,783 1,927 2,052 Financing C/F ,209-2,332 0 Reported PAT 3,534 3,278 3,852 4,099 Other Current Assets 2,499 1,356 1,467 1,578 Net change in cash 2,799 1, ,512 FDEPS (Rs) Cash 6,060 10,155 11,055 14,567 RoE (%) 28 % 22 % 24 % 22 % DPS (Rs) Total Assets 13,568 16,729 18,353 22,545 RoIC (%) 28 % 22 % 24 % 22 % CEPS (Rs) Non-cash Working Capital 2,998 1,848 2,000 2,145 Core RoIC (%) 54 % 49 % 58 % 56 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 1 % 67 % 61 % 0 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 35 % 34 % 36 % 36 % FA Turnover P/B PATM (%) 27 % 25 % 27 % 27 % Net D/E P/FCFF Tax Rate (%) 19 % 24 % 23 % 23 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 1 % -2 % 8 % 7 % Capital Employed/Equity EV/Sales FDEPS Growth (%) 3 % -7 % 18 % 6 % Dividend Yield (%) 0.1 % 3.5 % 3.7 % 0.0 % TTM P/E vs. 2 yr forward EPS growth TTM P/B vs. 2 yr forward RoE ROE 2,000 40% 20x 65% 8x EPS Growth 35% 3,000 1,600 18x 30% 2,500 55% 6x 1,200 25% 15x 2,000 20% x 1,500 45% 4x 15% 10% 8x 1,000 3x % 5% 500 2x - 0% - 25% May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 7 of 11

8 Historical Consolidated Financials P&L (Rs Mn) FY14A FY15A FY16A FY17A Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A Revenue 8,410 9,421 13,143 13,300 Equity Capital PBT 3,316 2,978 4,510 4,358 Op. Expenditure 4,874 6,266 8,337 8,612 Reserve 5,588 6,847 10,455 13,942 Depreciation EBITDA 3,536 3,155 4,806 4,689 Networth 5,889 7,150 10,863 14,350 Others Depreciation Long Term Debt Taxes Paid , EBIT 3,206 2,654 4,240 4,170 Def Tax Liability Change in WC ,236 Interest Expense Minority Interest Operating C/F 1,950 2,432 3,846 2,817 Other Income Account Payables Capex , PBT 3,316 2,978 4,510 4,358 Other Curr Liabi 1,746 2,192 1,318 1,267 Change in Invest Tax , Total Liabilities & Equity 7,914 9,592 12,654 15,766 Others PAT bef. MI & Assoc. 2,557 2,295 3,429 3,536 Net Fixed Assets 1,548 1,670 3,398 2,521 Investing C/F , Minority Interest Capital WIP Change in Debt Profit from Assoc Others Change in Equity Recurring PAT 2,557 2,295 3,429 3,536 Inventory Others , Extraordinaires Account Receivables 996 1,261 1,861 1,895 Financing C/F , Reported PAT 2,557 2,295 3,429 3,534 Other Current Assets 1,581 1,510 1,352 2,499 Net change in cash ,091 2,799 EPS (Rs) Cash 3,560 4,419 5,459 6,060 RoE (%) 50 % 35 % 38 % 28 % DPS (Rs) Total Assets 7,914 9,591 12,654 13,568 RoIC (%) 49 % 35 % 37 % 28 % CEPS (Rs) Non-cash Working Capital ,762 2,998 Core RoIC (%) 110 % 71 % 70 % 54 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 48 % 54 % 1 % 1 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 42 % 33 % 37 % 35 % FA Turnover P/B PATM (%) 30 % 24 % 26 % 27 % Net D/E P/FCFF Tax Rate (%) 23 % 23 % 24 % 19 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 27 % 12 % 40 % 1 % Capital Employed/Equity EV/Sales FDEPS growth (%) 49 % -10 % 49 % 3 % Dividend Yield (%) 2.6 % 2.6 % 0.1 % 0.1 % May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 8 of 11

9 Equirus Securities Research Analysts Sector/Industry Equity Sales Abhishek Shindadkar IT Services Vishad Turakhia Ashutosh Tiwari Auto, Metals & Mining Subham Sinha Depesh Kashyap Mid-Caps Sweta Sheth Devam Modi Power & Infrastructure Viral Desai Dhaval Dama FMCG, Mid-Caps Binoy Dharia Manoj Gori Consumer Durables Dealing Room Maulik Patel Oil and Gas Ashish Shah Rohan Mandora Banking & Financial Services Ilesh Savla Associates Manoj Kejriwal Ankit Choudhary Rohit Rajani Bharat Celly Sandip Amrutiya Harshit Patel Compliance Officer Meet Chande Jay Soni Parva Soni Pranav Mehta Ronak Soni Vikas Jain Rating & Coverage Definitions: Absolute Rating LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies ADD: ATR >= 5% but less than Ke over investment horizon REDUCE: ATR >= negative 10% but <5% over investment horizon SHORT: ATR < negative 10% over investment horizon Relative Rating OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon BENCHMARK: likely to perform in line with the benchmark UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Registered Office: Equirus Securities Private Limited Unit No. 1201, 12th Floor, C Wing, Marathon Futurex, N M Joshi Marg, Lower Parel, Mumbai Tel. No: +91 (0) Fax No: +91- (0) Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion. Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad Gujarat Tel. No: +91 (0) Fax No: +91 (0) May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 9 of 11

10 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited Analyst Certification I,AbhishekShindadkar, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Disclosures Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital Market (Reg. No. INB ), Futures & Options Segment (Reg. No.INF ) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB ) of Bombay Stock Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH ) and as Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg. No. INP ). There are no disciplinary actions taken by any regulatory authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to merchant banking services, private equity, mergers &acquisitions and structured finance. 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Thus, investors should be aware that the firm may have conflict of interest. May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 10 of 11

11 A graph of daily closing prices of securities is available at and (Choose a company from the list on the browser and select the three years period in the price chart). Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Research Analyst or Relatives financial interest Research Analyst or Relatives actual/beneficial ownership of 1% or more Research Analyst or Relatives material conflict of interest No No No Disclaimer for U.S. Persons ESPL/its affiliates are not a registered broker dealer under the U.S. Securities Exchange Act of 1934, as amended (the 1934 act ) and under applicable state laws in the United States. In addition Equirus is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the Acts ), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on soliciting the securities business in that jurisdiction without going through the registration requirements and/or prohibit the use of any information contained in this report. This Report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules. May 31, 2017 Analysts: AbhishekShindadkar (abhishek.shindadkar@equirus.com , ) Page 11 of 11